His small nongovernmental organization, Yirenping, has enjoyed remarkable success in helping HIV and hepatitis B sufferers fight discrimination by Chinese employers, universities, and government departments. For this challenge to the authorities, though, the group is paying a high price.

Last year, police raided Yirenping’s Beijing office and confiscated all its publicity material and legal aid brochures – hence the empty bookshelves. In March, officials subjected their accounts to an unusually prolonged investigation and warned them of more to come.

“I am very worried about our future,” says Mr. Yu, Yirenping’s chief coordinator. “I’m afraid we may have to close.”

NGOs tied up

He is not alone. At a recent meeting of around two dozen NGOs here, none reported having been able to comply with regulations announced on March 1 by the State Administration for Foreign Exchange (SAFE) requiring legally notarized grant agreements before they can receive money from foreign foundations.

The 14 activists working for Yirenping are keeping its three offices open “by borrowing money from friends on a personal basis,” says Yu. “But we can’t go on doing that forever.”

“We are very concerned about how these regulations affect the operation of our grantees in China,” says Jane Riley Jacobsen, an NED spokeswoman.

The SAFE circular said the new rules were “for the purpose of … facilitating the receipt and payment of donations in foreign exchange.” So far they have had the opposite effect, and some observers suspect political motivationsbehind the regulations.

“They want to keep a closer watch on NGOs’ foreign relations … and get better control over the NGO sector and civil society,” says Sarah Davis, head of Asia Catalyst, a New York-based organization that supports Chinese NGOs.

Rules unclear

Not all NGO’s have been hurt by the new rules. Some receive their grants through Chinese banks that have not yet begun enforcing the regulations. Others, registered with the Civil Affairs Bureau, have had their grant agreements certified by Chinese notaries.

But Yirenping, like almost every other activist group in China working on politically sensitive issues such as Aids or citizens’ rights, has not been able to register with the Civil Affairs Bureau and functions instead as a private company. Nor has it been able to find a Chinese notary ready to certify its grant agreement with the NED.

The rules do not specify how or where grant agreements should be notarized, and SAFE has not clarified the question. (The agency did not respond to questions this reporter put in a fax to them.)

“I’ve put in untold numbers of hours of research” trying to work out what the regulations demand, says an NED official working with Chinese grantees, who asked not to be named because of the sensitivity of the issue. “These are loosely written rules with multiple interpretations possible.”

The NED, taking legal advice in China and the US, has concluded that its agreements with Yirenping and other Chinese grant recipients should be notarized by the Chinese embassy in Washington, and is still gathering the required documentation.

“This route is open and transparent and dictated by law,” says the NED official. “We will follow every step necessary to see where that takes us.”